Avgas price and the light plane ownership

On Fri, 01 Jul 2005 13:37:32 -0700, M wrote:


Anyone worries about what the rising avgas price to the light plane
ownership in the U.S? I have absolutely no doubt that the average
avgas price will surpass $5/gallon in about 5 years. We'll probably
see a significant drop of GA flying, along with a big drop of the value
of used airplanes. It's really depressing just to think about it.

I wouldn't worry about it too much. Most people don't realize some simple
facts about oil and fuel costs.

One, the price we pay per barrel has zero to do with its availability. The
price we pay is basically a speculative futures price based on
estimates of what the market will bare. Fact is, oil companies around the
world are making record profits.

Two, there is now more known oil in the world than there has ever been in
the history of mankind. The only thing that changes is where it's at, how
cost effective it is to obtain it, and what quality the oil is. With the
prices as high as they are now, VAST supplies of oil suddenly become
economically feasible.

Three, as the price per barrel sits above $50/barrel, especially above
$60/barrel, MANY, MANY, MANY alternative fuel options become economically
feasible. Heck, if they would lift the ban on hemp (which is not pot) in
the US, ethanol can actually become a viable fuel source without
government support; as is the case for corn-ethanol production, which at
best, is at a break even form an energy perspective. Meaning, it takes
about as much energy to produce ethanol from corn as we get back out of
it. As a rule of thumb, it actually takes more energy to make
corn-based ethanol than we get out of it. Hemp is known to provide up to
3x better yeild, per year, than corn and requires no pesticides (unlike
corn). Other alternatives include pure bio-fuels and even purely
synthetic options. Synthetics are expensive but becomes feasible around
$50+/barrel.

So why don't we see fuel more options? Simple ecomonics. The oil
companies don't want to invest the billions into processing more low cost
crude ($28/barrel) because they want to be assured a return on their
investment. If oil prices fall, it's harder to get that return on new
refineries. Alternate fuel supplies take time to bring to market and the
new entries require a stable market to justify the investment. In the
global picture, war = unstable oil markets; which is where speculation
comes in. If five years from now, prices have continued to rise, then I
think you'll start to see MANY alternatives can start to come into the
equation which will lower our fuel costs again. ...as theory goes anyways...

Cheers,

Greg